Fresh blow for shopping centre owner as equity raise is shelved
Intu, the owner of the Broadmarsh and Victoria Centre shopping centres in Nottingham and part-owner of a mall in Derby, has shelved plans to raise between £1 billion and £1.5 billion of equity following “extensive” discussions with its shareholders and potential new investors.
The company said it was unable to drum up enough shareholder support for the plans.
The decision casts doubt over a £440 million credit facility signed just a few days ago which was dependent on Intu raising a minimum of £1.3 billion of equity. The facility would replace an existing £600 million RCF which is due to expire in October 2021.
It has also emerged that the market value of Intu Derby and Intu Victoria Centre has decreased dramatically, with the former now worth £77.3 million as compared to £372.5 million in 2018. The Nottingham centre was valued at £201 million at the year end, down from £261 million the previous year.
In a worrying sign for Intu, an independent valuation of its portfolio at 31 December 2019 delivered a valuation deficit of £2 billion. The shopping centre owner, which has been engaged in efforts to fix its balance sheet for some time, said this was due to “weak sentiment” rather than hard transactional evidence.
In a statement, Intu said: “While a number of intu’s shareholders and potential new investors indicated their support for an equity raise, the Board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business and intu was therefore unable to reach the target quantum at the current time.
“However, during this process, intu received several expressions of interest to explore alternative capital structures and asset disposals.
“Accordingly, intu will continue and broaden its conversations with its stakeholders with a view to discussing the range of options available to the Company to demonstrate the equity value of the business and to utilise its assets to provide further liquidity. These include alternative capital structures and solutions and further disposals. intu will also continue to keep under review the feasibility of an equity raise.”
Despite the damaging news, Intu says it delivered a “robust” operational performance in 2019 given the challenges facing the retail sector.
Chief executive Matthew Roberts said: “We remain focused on fixing our balance sheet in the near term to ensure this business has the financial footing it needs to realise its significant potential. While it is disappointing that the extreme market conditions have prevented us from moving forward with our planned equity raise, I am pleased that a number of alternative options have presented themselves during the process which we will now explore further.
“We have a concentrated and well-invested portfolio of many of the UK’s best retail and leisure destinations where both shoppers and customers want to be. Operationally our business is strong, delivering a resilient rental performance despite ongoing pressure from CVAs and administrations, with stable occupancy rates and footfall that consistently outperforms the benchmark. Our centres are the best performers in the regions in which we are present and independent research shows that stores with intu outperform retailers’ average sales by nearly 30 per cent. This is a compelling proposition and one that will stand the test of time.
“We will face further challenges in what has been an extraordinary few months for intu and the wider sector, but I am confident that we will face these head on and emerge a leaner, fitter and more focused business.”
